The average credit card debt is just over $2,000! Ouch!
The average college student debt, after four years, is $25,000.
College students don’t need another reason to incur debt.
But, there are money-wise reasons for a college student to have a credit card.
- With a credit card a student can build a good credit history for future loans.
- Students can learn to set spending limits and budget with a card.
- If your student should meet with an emergency, s/he will always have access to cash.
So what to do? Penny Pinching Hints has some tips for teaching a college student the ropes about wise credit card use.
- Make sure your college student shops for a card that has no higher than a 16% APR. BTW, teach him or her what APR means.
- Avoid an annual fee. Plenty of cards today have credit available for no annual fee. Also make sure the card has no processing fees and no transfer fees and has reasonable late payment fees.
- Steer your college student in the direction of a rewards card but explain that some rewards have limits and expiration dates. Cards may also not give rewards for every item bought but for only certain categories of items, like food or gas.
- Explain that the credit card is not meant for purchases one can’t afford. Your student should never spend more than s/he can pay, in full, at the end of the month. 16% is a very high interest rate for any loan, especially when you can buy a house today with a mortgage rate of under 5%. A college student should also never spend any more per month than 30% of the card’s entire limit.
- Set up cell phone and/or computer alerts for the credit card due date. Your student could be charged up to $35 dollars for being even one day late. That could buy a tank of gas.
- A college student should know that applying for more than one card at a time is not good for a credit rating. Each time there is a credit card application, it can take a few points off a credit score. College students, any one for that matter, should have only one card at a time.
- Take advantage of some cards providing balance alerts. You and your student can set a spending amount per month, and the credit card company will let you know when you cross that line.
- Consider getting a prepaid debit card so that you can control your finances and keep within your allowance.
There are many good student credit cards out there: Discover Student More Card, Capital One’s student card, and Master Card’s dependability. The choice is up to you. Just remember, wise use of money is an education. College should be a time to learn more than physics!
Share and Enjoy